ETFC planning 10-15pc hike in electricity rates

The Electricity Tariff Fixation Committee (ETFC) is planning to revise the electricity tariff within the next three months. Power rates are likely to increase 10-15 percent. This is the second price hike in one and a half years. In June 2012, the ETFC had raised the tariff by 20 percent after a gap of 11 years.

“We are giving serious consideration to the proposed tariff hike,” said ETFC Chairman Ganesh Prasad Subba. “A committee has been formed, and we will soon be publishing a notice in the newspapers to gather feedback from consumers.”

On May 2013, the Nepal Electricity Authority (NEA) had approved the management committee’s proposal to increase the tariff by 20 percent on an average. The NEA had then gone to the ETFC to get the plan okayed. The NEA has been pressing for a tariff hike to stabilise its financial condition by equalising losses and profits.

The NEA has proposed an average tariff hike of 20 percent for all customers except for households consuming less than 20 units of electricity monthly.

Apart from publishing a public notice, the ETFC will hold a series of interaction programmes with consumers before hiking prices. “The NEA has demanded a 20 percent price hike. The tariff will be hiked after making a detailed study,” said Subba. “We will also ask for the government’s approval, and if it is willing to shoulder some of the cost, the tariff hike might be nominal.”

NEA Spokesperson Sher Singh Bhat said that the NEA incurred a loss of Rs 4 billion in the last fiscal year, and an increment in the tariff would help it to stay in good financial health. According to Bhat, the proposed 20 percent increment in tariff would allow the NEA to break even

“The last time power tariffs were hiked, we had demanded a 40 percent raise,” said Bhat. “Since the rates went up only 20 percent, a need to review the tariff has surfaced again.” Apart from ballooning losses, appeals from independent power producers for a higher power purchase agreement (PPA) rate too have necessitated a tariff hike, the NEA said.

The government has been hesitant about hiking electricity prices for fear of triggering public protests. The political costs of jacking up power rates have also deterred the government from doing so.

The NEA’s cumulative losses amounted to Rs 14.31 billion even after the government wrote off a staggering Rs 27 billion last year. And it has been pestering the government to increase the tariff to help bring down its losses.

Meanwhile, public pressure has been mounting on the NEA to slash its operation costs instead of penalising consumers for its inefficiency. Its officials have also been accused of corruption, a charge that spread rapidly after its former acting managing director and other officials were arrested by the Commission for Investigation of Abuse of Authority (CIAA).

Meanwhile, the ETFC has been preparing a long-term scheme under which power tariffs will automatically rise 5 percent annually. The plan also envisions charging different rates as per the season – dry and wet – from the next fiscal year.

Although the ETFC Regulation allows it to hike the electricity tariff by 5 percent annually based on a standard formula, it has not been able to do so since it has not created such a formula.

According to the ETFC, the formula will be developed on the basis of various factors including the consumer price index, inflation, industrial productivity, power purchase rate (PPA) for developers, impact on power consumers and the exchange rate of the US dollar.